Domestic companies relies too heavily on bank loans, reflecting the undeveloped corporate direct financing market. Financial risks thus would concentrate in the banking system, said a central bank report in Beijing on Friday.

The People's Bank of China (PBOC) cautioned in its report of the international financial market in 2007 that Chinese banks should work to keep a sound system.

China's property and stock prices had seen major fluctuations, which would affect financial stability and deserve close observation, it said.

The growth of developed economies slowed down in 2007, while that of emerging markets and developing economies has remained a rapid growth, it said.

Hedge funds and sovereign funds are playing an increasingly bigger role in the world financial market, it said.

Turbulence in the financial market, global imbalances, rising crude prices would constitute major risks in future world economy. The high-flying crude and metal prices would remain, and fluctuations in financial markets would persist, estimated the report.